Second of a two-part series
Industry winners and losers
While Asean has nominated 11 “priority integration sectors” comprising agribusiness, air travel, automotive, e-Asean, electronics, fisheries, healthcare, rubber, textiles, tourism and wood, there are expected to be some winners and losers in the process.
In the auto sector, Chehab said Thailand, Indonesia and Malaysia would further strengthen their position as manufacturing hubs, resulting in other countries such as the Philippines missing out on jobs and investment. Indonesia and the Philippines are expected to drive vehicle demand growth, given their large populations and low car ownership. Already, Japan’s Toyota Motor has flagged a new $1 billion investment in Indonesia, with Indonesian President Joko Widodo seeking further Japanese investment during his recent visit to Tokyo.
However, while smaller economies such as Cambodia and Laos are also expected to attract investment due to their lower wages, Chehab said non-tariff barriers such as excise duties could weigh on further integration, preventing the predicted industry growth from being fully realized.
The pharmaceuticals and healthcare industry is seen as another winner from the AEC, with Chehab predicting that Asean pharmaceutical sales will more than double by 2023, rising from $21 billion in 2013 to $50 billion, despite disparities in intellectual property rights and resources preventing full integration.
Chehab said increased government investment in healthcare and aging populations would spur demand, along with rising incomes. Private healthcare providers are expected to expand their regional footprint, while medical tourism should benefit Singapore, Malaysia and Thailand.
However, he warned of a potential “brain drain” of medical professionals from the less developed economies to their richer rivals, compounding a shortfall of medical staff and infrastructure in countries such as the Philippines and Indonesia.
“This is an existing trend, as for example many Filipino healthcare workers are already moving to Japan, but the AEC may accelerate this process, putting more pressure on some of the poorer countries which are unable to retain their staff,” he said.
In agribusiness, Thailand, Malaysia and Vietnam are expected to benefit the most, although given the sector’s political sensitivities, protectionist countries such as Indonesia may see limited gains. According to Chehab, Thailand could gain market share in sugar exports from the Philippines and Vietnam, while Vietnam should emerge as a winner in rice exports at the expense of Thailand. Vietnam, Malaysia and Thailand should also benefit the most from growing demand for dairy products, he said.
Another key winner from the AEC should be the region’s consumer electronics, IT and telecommunications sector. This is despite slow progress on removing barriers to foreign investment, particularly in telecoms, where countries such as the Philippines, Vietnam and Indonesia have high levels of state involvement.
Vietnam, Cambodia and Laos should attract increased investment in consumer electronics due to their lower wages, with both Indonesia and Vietnam becoming sizeable growth markets. Meanwhile, Chebab said the e-Asean initiative and increased smartphone usage would boost e-commerce, with some 60 million new consumers gaining internet access over the next five years, particularly in Indonesia.
“As a whole, the Asean region will benefit tremendously from the growth opportunity, the increased specialization, the reduction in prices for consumer goods as well as the increased integration of these economies,” Chehab said.
However, despite the AEC’s potential, headwinds include protectionist pressures limiting reforms, along with a potential slowdown in major trading partners, given that intra- Asean trade accounts for only a quarter of the total. China’s position as the region’s largest trading partner has left Asean exposed to a slowing Chinese economy, while top foreign investor, the European Union is struggling to emerge from recession.
Concerns have also been raised about the ability of the Asean Secretariat to drive change given its limited resources compared to bodies such as the European Union.
Nevertheless, Asean’s growth potential should keep the region in the spotlight for some time to come, regardless of its expected stumbles toward full integration. TNS